Arcutis at TD Cowen Conference: Strategic Growth and Market Opportunities

Arcutis Biotherapeutics (NASDAQ: ARQT) presented a robust strategic vision at the TD Cowen 45th Annual Healthcare Conference on Tuesday, 04 March 2025. The company highlighted its strong Q4 performance and optimistic outlook for 2025, driven by the successful launch of Zoryve for atopic dermatitis. While Arcutis expanded its sales force to enhance market engagement, it also anticipates a slight increase in SG&A expenses.

Key Takeaways

• Arcutis reported $71.4 million in Q4 revenues, with significant growth from the previous quarter.
• The company expanded its sales team and partnered with Koa to target primary care physicians and pediatricians.
• Arcutis aims for cash flow breakeven by 2026, despite expected SG&A expense increases.
• A celebrity partnership with Odell Beckham Jr. aims to raise awareness about seborrheic dermatitis.
• The company is confident in its IP portfolio amidst ongoing litigation.

Financial Results

Arcutis reported total revenues of $71.4 million for Q4, with $69.4 million from product revenues and a $2 million milestone payment. Adjusting for a $4.1 million non-recurring product return, Q4 revenue still showed over 50% growth from the previous quarter. Full-year revenues reached $167 million, and the company achieved a $250 million revenue run rate by year-end. Arcutis estimates a 3% market share in the branded topical steroid and non-steroidal market.

The company ended the quarter with $229 million in cash and equivalents, and it reduced its debt to $100 million. Arcutis plans to reach cash flow breakeven on an annualized basis by 2026.

Operational Updates

Arcutis expanded its sales force from 90 to 140 representatives to better engage with dermatologists, nurse practitioners, and physician assistants. The company has partnered with Koa to market its products to primary care physicians (PCPs) and pediatricians, with significant contributions expected in 2025.

Arcutis is pursuing label expansions, including pediatric atopic dermatitis (ages 2-5) and scalp psoriasis. The company is also expanding coverage for its products, targeting Medicaid and Medicare patients, with plans to extend Medicaid coverage to 35 additional states.

Future Outlook

Arcutis projects continued growth driven by label expansions, strong coverage, the Koa partnership, and the conversion of patients from topical steroids. The company anticipates a PDUFA approval for pediatric atopic dermatitis patients and for the foam for scalp and body psoriasis. Pediatric atopic dermatitis represents a 1.3 million patient opportunity, and 40% of psoriasis patients have scalp involvement, highlighting significant market potential.

Q&A Highlights

The strong Q4 performance was attributed to improved sales force execution and the movement of patients from steroids to modern treatments. Arcutis is well-positioned to capture a substantial portion of the non-steroidal market. The partnership with Odell Beckham Jr. was initiated because he found the product effective for his seborrheic dermatitis.

Q1 revenues may be flat compared to Q4 due to higher gross-to-net adjustments, but prescription growth remains strong. The PDUFA for the foam for scalp and body psoriasis will not introduce a new SKU; it will remain the same 0.3% foam currently prescribed for seborrheic dermatitis.

Arcutis’ management remains confident in the strength of their patent portfolio, despite ongoing litigation. They believe the market is beginning to understand the potential for sustained growth, particularly with the shift away from topical steroids in dermatology.

For more detailed insights, readers are encouraged to refer to the full transcript below.

Full transcript - TD Cowen 45th Annual Healthcare Conference:

Operator: Okay.

Tyler Van Buren, Senior Biotech Analyst, TD Cowan: Mic’s on. There we go. Good morning, everyone. Welcome again to day two of TD Cowan’s forty fifth Annual Healthcare Conference. My name is Tyler Van Buren, Senior Biotech Analyst at TD Cowan For our next session, very excited to have a hybrid presentation and Q and A with Arcutis.

And it’s my pleasure to introduce David Topper, the CFO, and Patrick Burnett, the Chief Medical Officer of Arcutis. Patrick and David, it’s a privilege to have you both here. Thank you very much for joining me.

Operator: Thanks for having us.

Tyler Van Buren, Senior Biotech Analyst, TD Cowan: I’ll go ahead and hand it over to you to kick off the presentation.

Patrick Burnett, Chief Medical Officer, Arcutis: Great. Thanks, Tyler. Yeah, we’re really excited to be here to talk to you a little bit about where we are at Arcutis. And we just it’s nice to start up the year with a very strong fourth quarter and we had a really strong fourth quarter. And I think that that came from a couple of different trends that we’re seeing in the business and we expect these to fully continue and to make 2025 also very strong.

First of all, as you know, if you know the company, we’ve had a series of launches and we’ve been able to really build a very strong portfolio for Zareve. I’m going to talk about that a little bit in a minute. But our most recent launch is in atopic dermatitis, which is a very large patient population and fits very nicely overlaying with the healthcare providers that we’re already talking to for Zareve for our existing indications that were seborrheic dermatitis and psoriasis. In addition, around the mid of last year, we increased our sales force from about 90 to 140, and we feel that that really gives us just the right engagement for those key targets across The US. We’re talking about dermatologists primarily, a smattering of allergists, and also a lot of nurse practitioners and PAs who are writing a large percentage of the prescriptions taking care of dermatology patients and are embedded within dermatology offices primarily.

Again, I gotta talk a little bit about the portfolio, but I think one of the truly unique aspects about Arcutis and Zareve, is that we’ve been able to build this related brand that really covers all of the major inflammatory diseases that are coming into a dermatology office. And then one of the things that may not be quite so visible, but certainly has been a huge focus of effort for us at the company is to continue to improve the execution on our commercial team, especially in the sales force, and just ensuring that we are improving every single day with how it is that we’re engaging with health care providers and making sure that the message for what Zareev can bring to patients and to those providers is being made clear. And I think that that’s also something that we anticipate to increase as we move into 2025. We had a lot of turnover at the company as we look to find just the right talent. And I think we have a fantastic team right now and we’re seeing the results from that and that’s only going to continue to improve.

So this slide kind of lays out our portfolio for Zareve right now. Plax psoriasis was our first indication, seborrheic dermatitis, and that was for the zero point three percent cream. Seborrheic dermatitis was our next approval and that really brought a completely new concept, to the market, which is a once daily nonsteroidal foam in an indication, seborrheic dermatitis, that hadn’t had a new mechanism of action in several decades. So really changed the, the treatment landscape for seborrheic dermatitis patients, and I think everybody has been very pleased with the uptake for Foam. I think the important part for us as we expand this portfolio is that our next approval is within that Foam, was in that foam product, and now we’re going to be adding scalp psoriasis.

So we conducted a trial that looked at co primary endpoints for scalp investigator global assessment and body. And what we saw was that we get exactly the same efficacy when we use the foam as the cream, which is already has a very strong position within, psoriasis. But the foam allows us to treat the disease no matter where it appears in the patient. It can be the scalp, knees, elbows, the genitals, and this is and it’s a once daily treatment. This has never been seen before, in dermatology for this patient population.

And then as well, as I mentioned, atopic dermatitis was our most recent launch, and you can see from the size of the market, twenty six million atopic dermatitis patients out there. This is a very large segment of dermatology inflammatory disease, but it has a little bit more noise within that market. There are some other products that are that are non steroidals that are being marketed to patients with atopic dermatitis. But I think the profile that we have with a very strong safety, very rapid response with regard to itch and signs and symptoms, very good tolerability. That’s been a hallmark for challenging, to treatment of atopic dermatitis patients, is being able to get a quick response and also to have no stinging and burning, with a topical nonsteroidal.

But I think one of the reasons that we really truly benefit as a portfolio is that the access, the brand name is consistent across all of these different products. So so a healthcare provider having a positive experience with seborrheic dermatitis or psoriasis immediately plays into their thinking as they’re about to prescribe for an atopic dermatitis patient. And so I think that, one of the kind of aspects you’ll hear us talk a lot about is kind of really looking to become that like preferred brand for dermatologists for managing their chronic inflammatory diseases in the clinic. David?

Operator: Thanks, Patrick. As you heard, we had a very, very strong fourth quarter. So we reported total revenues for the quarter of 71.4. Of that, sixty nine point four were actual product revenues. The other two was a milestone payment.

So start with ’69. And of that, the other adjustment that I would make for anyone who’s building models or thinking about projections is I would take out the non recurring, adjustment we made for product returns of about $4,100,000 So it takes you down to 65 and change. That’s still, you know, in excess of 50% growth from the previous quarter, which we feel really good about. And and as Patrick said, I think that’s just still barely scratching the surface the way we sort of look at the total addressable market. So we had a hundred and just under a hundred and $67,000,000 of revenues for the for the full year.

And that just to do the math for people, that 65 and change means we were at a $250,000,000 run rate at the end at the end of the year, for what we estimate is about a 3% market share when you add up the steroidals, topicals and the nonsteroidal topicals branded ones, about 3% market share. So at that rate, really, even if you only got to 15% or 20% of the market share, it is a very, very large product. So we feel like there’s a lot a lot of room to go. Total OpEx of about $3.00 $6,000,000 OpEx will will be higher than that in in the first quarter. I don’t think R and D is going to change much, but SG and A will go up a bit.

We did have some anomalous items in the fourth quarter, some expenses that will roll forward to the first quarter, a few working capital items. We need to annualize the cost of the sales force that Patrick described to you, sales force increase. So, it will go up, but but we stand by what we said we’ve said before, which is that we will be at cash flow breakeven on annualized basis in 2026. Okay? That doesn’t mean that SG and A won’t go up a bit in the first quarter.

It will, but we will get to breakeven. I’ve talked about the market shares. And again, we we see the total addressable market as being about 17 or so million patients. It’s very, very big. Right?

Most of those are are, converts, if you will, from from steroids. So there’s a lot of lot of room to go. This is a a a buildup of that of that patient population starting with the commercial patients. Those those, commercially insured for all the indications, including pediatrics who we’re seeking approval for and should get later in the year. We’ve got Medicaid where we’ve made a lot of progress.

We basically, today, have about one out of every two Medicaid patients. When they look at the states where we’ve been approved already, we don’t know what most people do, which is go after the high population states first. We’ll go after the next 35 or so states next, but that’s a that’s a very large population. And then, you know, we we will we will go after Medicare as well. I would say that the Inflation Reduction Act has thrown a little bit of a monkey wrench into that whole mechanism there.

They’ve been pretty distracted, but we believe we’ll we will we will be in that program in in 2025. And then as I think everyone knows, we did strike a partnership with Koa, who’s marketing our whole suite of products to PCPs and pediatricians. That, again, is a very, very large market in excess of 8,000,000 patients. We think that’s a longer selling cycle. They started in late September.

We’ve we’ve never thought that their contribution would be significant until 2025. There was a non zero contribution in 2024, but it was not a, you know, significant number. But we still believe in 2025, they’ll make a meaningful contribution. And we’ve committed that when that does happen, we will give all of you, all of the markets, some data so you have this sort of commissions and so forth. So that’s a 17,000,000 patient population.

Patrick Burnett, Chief Medical Officer, Arcutis: Yes. And as we look at where these patients are coming from for Zareeb, and one of the reasons that we’re so optimistic about being able to continue the growth that we’ve seen in the fourth quarter is by looking at where the patients are right now for topical treatment of these three conditions, plaque psoriasis, seb derm, and atopic dermatitis. And I think that you can see that with very little differences between the two of them, notably, you have some antifungal use in seb derm and a little bit of topical calcineurin inhibitor use in atopic dermatitis, the vast majority of these patients are on topical steroids, which have been kind of a mainstay for about fifty years. And I think that was primarily driven by the fact that there were no other, comp no non steroidal options that were really strong competitors for steroids. Steroids work relatively quickly.

They have a reasonable efficacy. It makes them a good acute treatment for these diseases. The problem is that you’re trying to manage a chronic disease with an acute treatment, and that leads to a lot of cycling on and off and makes them, in particular, very ill suited for the treatment of atopic dermatitis where patients have flares that can be quite devastating and kind of set them back, you know, months and months of effort trying to get their disease under control. Mhmm. So what one of the things that we really are focusing on is being able to increase the access so that we are just as easy to prescribe as a topical steroid.

Understanding that utilization management criteria are going to require a step through for topical steroids, but almost every single patient that walks into a derm office with one of these three conditions has had one steroid prescribed previously. But what is it that the next option they’re looking for to manage their disease chronically? And we’re really seeing a big difference, a change within the dermatology community, and it’s driven not just by Zareve, but also by the fact that there’s been kind of a renaissance of nonsteroidal topical treatments in dermatology. And I think we’re all benefiting from this, which is it just like when the biologics came into dermatology and it was no longer acceptable to write prescriptions for cyclosporin or immune suppressives that are better suited for a solid organ transplant, It’s also not really acceptable anymore to write non write steroid prescriptions to manage your psoriasis patient for twenty five years. We know that that causes bone fracture.

There’s a tremendous amount of education that’s going on from the podium and a lot of response from healthcare providers that are at these meetings. And we were just at this is now kind of the busy season. We have AAD coming next week. And there are sessions specifically dedicated to asking the question, what is the role of topical steroids in managing these kinds of chronic inflammatory diseases? And I think our brand is perfectly suited to be able to benefit from this.

The data that we show here shows that the efficacy for our atopic dermatitis patients with regard to EASI seventy five is consistent regardless of whether or not the patients have tried and failed the topical steroid. And we know that these steroid patients are should be harder to get under control because they’ve been affected a little bit longer than a novel patient who walks in and hasn’t been treated previously. So I think these data are very meaningful. We have similar data for psoriasis for seborrheic dermatitis as well. So, patients coming across from steroids looking for a long term management of their disease are gonna find a strong efficacy and safety profile in Zareef.

Operator: So I’m gonna go through this quickly because I know you have a bunch of questions, Tyler. But we we think we have a lot of wind at our back from a number of different sources. The the expanding label that I think all of you know about already, Our coverage, both commercial and government, I think, is very, very strong and picking up even further. Our partnership with Koa and the access that gives us to the PCP and pediatrician market very strong. And then again, most importantly, that huge universe of steroid scripts out there that where we think we can convert a lot.

So that’s the that’s where the momentum comes from. In terms of cash and cash flow and so forth, we ended there with about $229,000,000 of cash and equivalents. We used, again, almost cash in the fourth quarter. That was a little We will hit breakeven in 2026, but it you know, we haven’t hit it yet on an annualized basis. We did we did pay off half of our debt.

There was $200,000,000 of debt. We had restructured it significantly, improved the terms quite a lot, including the ability to repay half and then redraw it later if if in fact we ever want to do that. So but the debt’s down to about $100,000,000 with about 125,000,000 weighted average shares outstanding.

Tyler Van Buren, Senior Biotech Analyst, TD Cowan: Wonderful. Patrick, David, thank you very much for the presentation. We’ll get into some questions now. I’ll just follow-up again on the strength that we saw in Q4. Obviously, you guys posted a very nice result, beat consensus.

I think everyone was surprised by the prescription strength going into the end of the year. Obviously, I think people expected, 8%, the 0.5% cream for AD to grow significantly quarter over quarter. They expected continued growth from the Subderm foam quarter over quarter. What was kind of surprising was actually the 0.3% with the cream in psoriasis, right? Because from Q3 to Q2, there wasn’t much of a change, but we saw this big change into Q4.

Is there anything specifically going on with the cream psoriasis? Or is it just all these tailwinds and strength behind your back in the launch that’s impacting all these together? Go ahead.

Patrick Burnett, Chief Medical Officer, Arcutis: Yes. I would say it’s the latter. I think that we have improved execution, right, of our sales force. We have an expanded sales force. We’re reaping the benefits of that.

And if you think about the growth across all of these indications is really being driven by this kind of like movement of patients out of steroids into more modern treatments. And we are the preferred option, right? We’re holding a substantial portion of that non steroidal market right now. We’re going to benefit from that. I don’t see that there’s any reason that that growth wouldn’t be able to continue.

Tyler Van Buren, Senior Biotech Analyst, TD Cowan: Great. And at a $250,000,000 run rate you guys are approaching, I think, you’re crystal numbers, right, kind of peak sales potential of what topical products in the derm space have done. So I’m excited to see how much you can surpass that. 3% topical market share, obviously, the steroid percentage market share of that as you saw with the pie charts is much larger than that. I’m not sure you’re going to replace all of steroids, but can you elaborate on obviously, if you’ve got mild disease and you use maybe one tube a year sporadically, you may be okay with a steroid, but how many of the patients across these indications are more chronic users or the steroid issues are really significant?

Patrick Burnett, Chief Medical Officer, Arcutis: Yeah, I would say so so I I see patients one day a week as a as a dermatologist, and I think it’s really important to understand that kind of like day to day, effort that it takes to to manage these patients. And I think you captured it really well. Right? The patient that walks in who has a little bit of eczema, right? It’s dry, it’s February and the weather’s about to change and they’ve got a small patch of eczema somewhere.

I think that’s a very reasonable patient to have a topical steroid. Again, you’re using an acute treatment to treat what we don’t think is going to be a chronic disease. But when we’re talking about a true atopic dermatitis patient, a true psoriasis patient, and even if you look over into seborrheic dermatitis, you know, seborrheic dermatitis is not a disease that patients kind of, you know, have for a couple of days and then it goes away. If a patient walks in, has seborrheic dermatitis and you ask them about their disease, more often than not, they’re gonna give you a ten to twelve year history. And then all the kind of, like, crazy things they do to try and keep and then all the kind of like crazy things they do to try and keep from having that manifest during meetings and stuff that they’re doing.

So to be able to to offer them something that can that can very, you know, very simply relieve that, I think is a is a change from what it is that they’ve seen when they’ve walked into the to the dermatologist office in the past. So I I do I think it really is about finding chronic treatment for these conditions and, that that that group that is suitable for a short term acute treatment is relatively small, but it is it is there.

Operator: I think I think the universe of investors has really now started to more fully understand the true size of the addressable market tower. And I think it’s important to keep in mind, steroids are a step at it for most of our patients, okay, in terms of commercial coverage, for example. So almost by definition, they are coming from that universe, and it’s increasing as Patrick said.

Tyler Van Buren, Senior Biotech Analyst, TD Cowan: Fix my mic here real quick. But so, you know, you guys recently launched a celebrity partnership with, Ludlow Beckham Jr. Curious just to elaborate on that a little bit, why you selected OBJ and and what you’ve seen early on in terms of that potentially translating to sales?

Operator: So the reality, you you you mentioned selecting him. He actually selected us in a lot of ways. He apparently has suffered from seb derm for a long time, really struggled through it. He tried our product when a doctor prescribed it, and he loved it. It worked really well for him.

And he actually approached us through an agent, and said, I love your product. I wanna I wanna work with you. And that that’s how this conversation got started. And, you know, he, I guess, as it turns out, has a very, very large social media following. I’m not a social media expert, but he has a very large social media following.

And so the the, you know, the number of reads and clicks and so forth has really gone through the moon. It’s great.

Patrick Burnett, Chief Medical Officer, Arcutis: I think OBJ makes a very compelling spokesperson for this disease. You know, he has a beard. That is a particularly troublesome area. His journey is one that is very relatable for anybody who has seborrhe or people who have seborrheic dermatitis and they don’t know that they have seborrheic dermatitis. Because I think that’s one of the things that I heard when I heard him telling his story was so compelling is that he struggled to get a diagnosis for what this actually was.

And if you don’t have a diagnosis, then you’re never gonna be able to find your way to the right treatment. And so I think that’s where his story is very beneficial for us because I think there are a lot of patients out there that may have tried and then given up on therapies that have been around for many years, and weren’t aware that there’s something new or patients who have seborrheic dermatitis and don’t recognize that they do and, you know, don’t don’t know where to seek help to get the treatment that they need.

Tyler Van Buren, Senior Biotech Analyst, TD Cowan: Yeah. I guess psoriasis and AD patients are pretty well diagnosed compared to Subderm, right? So he’s increasing visibility in the area that you need it most.

Patrick Burnett, Chief Medical Officer, Arcutis: Yeah. Okay. Absolutely.

Tyler Van Buren, Senior Biotech Analyst, TD Cowan: The Koa partnership, you mentioned it started to contribute a little bit last year, hopefully more this year. Most people aren’t that familiar with Koa. Obviously, if you’re able to expand into primary care, the opportunity is large. So why did you select them as partner?

Operator: So we we wanted a partner that had an experienced Salesforce, but whose existing product lineup was such that they could really put us at a very, very high priority level. The the the drug that they were primarily marketing before this sort of went off exclusivity, so they had a real opening there, and they needed something for the Salesforce to do. They are well known you know, they are a subsidiary of a very large Japanese company, very high quality. And, again, they’re willing to put us in that sort of number one or number two position, which is what we wanted. So we they were the best partner.

Patrick Burnett, Chief Medical Officer, Arcutis: Okay. Yeah. Can I just add, I’m I’m super excited about the the use of this product in primary care? I I used to have the opportunity to, during training, give a lecture to primary care physicians about, like, how they should manage their dermatology conditions. And one of the the two kind of biggest challenges for them was always do I have the right diagnosis, right?

Some concern that maybe I’m calling it psoriasis, but it’s eczema or it’s on the scalp, I’m calling it psoriasis, but it’s actually seborrheic dermatitis. And the second thing is am I choosing the right therapy that is not gonna cause a problem for the patient? Right? If you’re talking about topical steroids, you’ve got, like, 400 different strengths to pick from, and they always wanted to know which is the strength that I give for this scalp? Which do I put on the face?

And that’s just a very complex algorithm that they’re trying to develop in their heads when they’re also trying to manage hypertension and everything else. I think this profile, you you know, we’re covering all of the major inflammatory diseases that are going to walk into a primary care office and you don’t have tolerability, local side effects. If you get the diagnosis wrong, if you get the strength wrong, you’re still going to get the efficacy and be able to help your your patients. So I think this relieves a lot of the anxiety that primary care providers had when they’re faced with a patient with inflammatory disease sitting in front of them and they’re not a they’re not an expert, like what do I do?

Tyler Van Buren, Senior Biotech Analyst, TD Cowan: That’s very interesting perspective. Yeah, the zero point three percent versus the zero point one five isn’t going to matter.

Patrick Burnett, Chief Medical Officer, Arcutis: It’s not going to make a difference just you know as long as they’re getting them into the right bucket, right, then you know like is it inflammatory, is it on the skin, then you know you’ll you’ll be able to get the patient, the relief from whatever they came to see.

Tyler Van Buren, Senior Biotech Analyst, TD Cowan: Do they prescribe a lot of topical steroids? If you look at those pie charts, are they a significant portion of the pie?

Patrick Burnett, Chief Medical Officer, Arcutis: A lot of patients that come into my office are coming from primary care because they wanna give them something and then walk them out the door and say, you know, go see a dermatologist. But they know that it might be a, you know, several month wait before they can get in if they don’t have a preexisting relationship. So they are they are using a lot. And they manage, especially when you think about pediatricians, they manage a lot of atopic dermatitis patients and seborrheic dermatitis because it’s associated with the onset of puberty. So they see a lot in their offices.

Tyler Van Buren, Senior Biotech Analyst, TD Cowan: Got it. And gross to net, that ramped very nicely over the course of your launch. Every quarter it was improving until you essentially hit steady state last year in the 50s, low 50s. You’ve reiterated kind of that expectation for this year. But if I’m not mistaken in q one, it’s gonna go to the high fifties before it kinda goes back to its normal, kind of mid to low fifties later in the year.

Is that how we should think about it?

Operator: Yeah. We we, you know, we reached, the fifties, I guess, more or less in the third quarter, not before, and we’ve said that’s where we think it’s gonna be. That’s a steady state, but as as good as you can do, but that it will vary within the fifties. Right? Probably get the lowest gross to net in general in the fourth quarter and maybe the highest one in the in the first quarter, but it will be in the fifties still.

But, you know, you do have people that accelerate refills into the fourth quarter, the deductible resets in the first quarter, some people switching insurance companies so that, you know, you get that normal retail pharmaceutical product effect for sure, but we think we can be in the 50s throughout the whole year. Okay.

Tyler Van Buren, Senior Biotech Analyst, TD Cowan: And in general, you expect continued growth in Q1 going into the beginning throughout the year or do you expect because of, in terms of revenues, because the higher gross to net, maybe deductible resets that Q1’s maybe a little flattish relative to Q4?

Operator: Well, I’m not expecting another 50% growth quarter, and for the first quarter, you know, for some of the reasons that we just talked about. Prescription growth itself, though, is very strong. You can see the scripts every every week the way we can, and that looks very healthy. So it’s a little different than revenue dollars, but that looks very healthy.

Tyler Van Buren, Senior Biotech Analyst, TD Cowan: Sure. Okay. Great. And the cream PDUFA, for pediatric AD patients ages two to five, approval is highly likely, but can you help define what that incremental opportunity will be for the cream?

Operator: Yes. I think one of the charts had that at about one point three million sort of total population. And I would imagine a very welcome product, right? How many parents want their kids on steroids? So that should work pretty well.

Patrick Burnett, Chief Medical Officer, Arcutis: Yeah. I think it is an important part of building the portfolio to be able to capture patients with atopic dermatitis. This is a disease that oftentimes has its onset in infancy and early childhood. And so being able to kind of capture those patients when parents and caregivers are the most concerned about the use of steroids on the skin. That two to five year old group is one that is very there’s a lot of awareness about steroids and the desire to try and avoid them.

Tyler Van Buren, Senior Biotech Analyst, TD Cowan: Yeah. The pediatrician has given us a steroid tube for her children, and you’re always like

Patrick Burnett, Chief Medical Officer, Arcutis: That’s exactly why apply? That’s exact that’s exactly yeah. It’s like, let me I’ll just try moisturizing a little bit more. But, so I think that the nonsteroidal treatment option is one that is very well received within that within that group. Great.

Tyler Van Buren, Senior Biotech Analyst, TD Cowan: And PDUFA for the foam late May for scalp and body psoriasis also low risk. How do you think about that incremental opportunity on top of the existing subderm indication will be like what we saw with AD relative to psoriasis or a little different?

Operator: Well, Patrick should opine here as well, but there I think about forty percent of psoriasis patients have scalp involvement. So it is a big, it it too is a very big population that we feel quite bullish about. I I should point out that unlike the other launches that we’ve had, this will not be a new skew. This will be the same point three percent foam, that is prescribed today for for seb derm. So you won’t have as much information available to you as to the number of scripts written for that indication per se.

For that matter, we won’t either, frankly. We’ll have some, but, so it’ll be a little harder to understand exactly what’s going on, but we think the population is quite robust.

Patrick Burnett, Chief Medical Officer, Arcutis: Yeah. I mean, I think it it it fills out our portfolio and and what we’re what we’re trying to build is a brand that is the preferred brand for dermatologists when they have a patient with inflammatory skin disease. And scalp disease has always been very, very hard to manage because you usually have to add one or two scripts to already existing two or three scripts that you might be using in that psoriasis patient. And that’s usually what pushes them over into a biologic. And biologics are a heavy drag on a healthcare provider as well as it is on a on a patient.

So I think having another option for your scalp patients to be able to kind of keep them within the topical space is gonna be very welcome. And it’s just going to continue to solidify our leadership as like the preferred topical for psoriasis patients.

Tyler Van Buren, Senior Biotech Analyst, TD Cowan: Great. I wanted to spend a couple of moments on your IP position, getting some more questions from investors on that. So what can you say about the upcoming litigation? And can you describe the company’s current IP portfolio for Zareev? What’s key to the core family of patents?

And what where you derive your confidence in them?

Operator: Well, Well, let me say a few words about the litigation situation, and then Patrick can can sort of help describe the IP portfolio itself. This is the single most frustrating topic for me right now because we’re in litigation, so there’s a limit to what you can say, and there are a lot of things I’d like to say, frankly. But we feel very strongly about the quality and the strength of our IP portfolio. We have 20 patents, and you can hear about them in a few minutes, but we feel very good about that. There is a Markman hearing coming up in April.

And while Markman hearings can sometimes be significant and determinative, this one will not be. It’s dealing with one little issue. So the trial itself is scheduled really for the spring and summer of twenty twenty six. That’s where we are. But you wanna talk about the patent?

Patrick Burnett, Chief Medical Officer, Arcutis: Yeah. I mean, as David said, we have a broad portfolio just to kind of focus on a couple of things that are particularly challenging to overcome related to formulation. We started the company, our first employee was, I would say, the most accomplished topical drug formulator, David Osborne, that was in the industry. He’s now retired from Arcutis, and he struggled heavily to be able to find a topical formulation for a drug that is so incredibly insoluble in water, and and then to make a stable formulation. And so one of the addition of hexylene glycol was really a serendipitous discovery discovery that really changed his ability to to create a product that would be shelf stable at room temperature across the concentration range that we’re talking about.

And it wasn’t clear that that was going to be able to happen in the early days. So I think being for someone to be able to avoid that hexylene glycol requirement and still have a product that is the equivalent of Zareev is going to be very challenging. And in addition, something that I’ve never seen before is the PK portfolio or the PK profile where you have a very low peak to trough. Usually you have a Cmax after you apply the drug and then over time that drops. We see this very unusual PK profile, which we think is critical for the safety and tolerability that we’ve seen.

And so if you change the decay profile, it’s not an equivalent drug. And we have meaningful and measurable systemic exposure from the treatment. So it’s not something that’s really avoidable. And if you have a higher Cmax, you’re going to see a different safety profile than what we saw. It’s not going to be an equivalent drugs.

I think that really puts them into a very small box with regard to how it is that they can engineer around even just those two aspects of our patent portfolio.

Tyler Van Buren, Senior Biotech Analyst, TD Cowan: Very helpful. We’re up on time, but in closing, I’d like to ask you both what aspect of the Arcutis story do you believe is most underappreciated by investors at the moment?

Operator: For me, again, I think people are starting to get it, but I think the size of the addressable market, Right? And, and therefore, how how how how long really we could keep growing at the rate we’ve been growing.

Patrick Burnett, Chief Medical Officer, Arcutis: Yeah. Mine would be a variant of the same. I I think that many companies have said, oh, we’re going to make a dent into topical steroids. Having been in dermatology for twenty years and heard many companies come and say that, what I’m seeing now at the meetings is not something that we’re doing. It’s this is a change in the field, and I think we’re just well positioned to be able to benefit from that.

And I think it’s a great change for dermatology patients and I think it’s going to be exciting to see how this moves forward.

Tyler Van Buren, Senior Biotech Analyst, TD Cowan: Wonderful. Patrick, David, thank you very much for your time.

Patrick Burnett, Chief Medical Officer, Arcutis: Thanks, Tyler. Thanks.

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